Text of the Chairman's speech delivered at the 16th Annual General Meeting of Essar Oil Ltd

Good afternoon, ladies
and gentlemen, On behalf of the
Board of Directors, I have pleasure in welcoming you to the 16th Annual General
Meeting of your company. The Annual Report and accounts have been with you for
some time, and I will take them as read. I would like to give you a brief
update on Essar Oil's progress in the last few months and the way we see the
future for your company.

The international oil
scenario and its impact on India
When we met at this time last year, experts believed that international crude
prices would hover in the range of US$60 per barrel. The year showed how
volatile this industry could be and prices climbed another 25% over the year.
On July 14, 2006, crude oil prices hit a record US$78.4 per barrel before
starting to climb down. It is a coincidence that exactly a year later, at our
AGM today, we can report that prices are back in the low US$60 range, and the
Indian basket will settle at slightly lower levels. OPEC leaders have indicated
that they will maintain production levels in the same range as winter
approaches in the US and Western Europe and demand of oil will firm up. Let us
hope that prices do not show the same volatility this year.

Progress of the refinery
project
On behalf of the Board and the employees of Essar Oil, I am extremely pleased
to report that we are in the final stages of completion of the refinery project
and expect testing and start up work to begin in a month's time. I wish to reinforce
that your company's refinery is coming up at an opportune time, as in spite of
increasing demand for finished petroleum and petro-chemical products, no
capacity has been added in the last few years and we believe that it will take
a few more years before there are significant additions to capacities,
especially in India.

Your company believes that
there are opportunities for middle and higher distillates products both in
domestic and export markets and when we complete the technological additions and
up gradation we will be in a position to extract maximum value from the
refinery's production.

I am extremely happy to
inform you that the first two crude consignments have arrived at Vadinar port
and as we are speaking to you, the primary process units are being readied to
take their first charge. I am also pleased to inform you that all utilities and
supporting infrastructure is complete. This includes major utilities such as
the power plant, desalination and demineralization plants, cooling tower, port
and single point mooring, seawater intake and captive crude and product
pipelines etc. I am sure all of you appreciate that putting together such a
complex project has to be done in a carefully planned sequential manner and I
can say that we are on the right track.

The international supply-trading
desk has started functioning and has commenced trading in crude. The first two
crude carriers that have arrived in Vadinar port are their first purchase
contracts.

We have made a lot of
progress on completion of the township and I am happy to report that key
officials are now living in the Essar Township close to the refinery. Essar's
Oil Club, with 90 rooms, is also fully functional and accommodates employees
and visitors to the refinery. Two schools promoted by the company have also
started functioning.

Your Board firmly believes
that the wait is over and our vision of building a world-class refinery will be
realized in a short time. The sweet rewards of our perseverance and the
untiring efforts of our employees are near.

Marketing
In spite of crude prices going up by over 20%, the Government of India revised
retail prices only once, in July 2006 and that too it was a case of too little,
too late. Public sector oil marketing companies were given concessions in the
form of oil marketing bonds while private sector companies like Reliance and
Essar were left to fend for themselves. Both companies have had to revisit
their entire retail marketing strategy, with great reluctance. With crude oil
prices coming down we are hopeful that our cost effective, franchisee based
business model will be able to take off again, although we believe that the
long term health of oil marketing companies, especially in private sector has
to be addressed early by the government in a more rational manner. In order to
mitigate the hardships faced by our franchisees, the company has worked out a
compensation package, which provides some financial relief to the franchisees.

Despite these problems of
mismatch between the product purchase price and the retail selling price, your
company is committed to the development of a country wide retail network. We
have a total 1000 retail outlets completed, with another 550 under various
stages of construction, which means that by the end of March 2007, we will have
a network of 1500 retail outlets. We have also identified 800 sites as suitable
for setting up outlets.

Exploration and
Production
As we have reported in the annual report, your company is formalizing a
development plan for its Oil & Gas wells in the Cambay region in which
crude oil find has already been reported. We are now awaiting approval for the
production-sharing contract from the government for its Ratna & R Series
offshore fields. The work on our Myanmar project is also progressing satisfactorily.

Your Board feels that this
year we will see increased activity by companies in the exploration business as
the demand for oil continues to rise. We will be able to increase drilling
activities as another Essar Group company has ventured into offering oil-drilling
services and has recently acquired 13 rigs for this purpose. We are confident
that there will be a lot of value for your company from this activity.

Conclusion
Finally, I must express our deep felt gratitude and thanks to our employees for
the tremendous effort that they have put in to get the refinery into the
commissioning phase ahead of approved schedule. It is said often that ‘systems,
technology and machines can be fixed but it is humans that make possible things
that seem impossible’. Our employees have shown the power of team work and
collective wisdom.

I would also like to thank
our colleagues at Essar Construction, Essar Shipping and Essar Power for their
contribution to the project.

I express my thanks to our
project management consultants, business associates, suppliers, and franchisees
for their support through the years. We are grateful to our bankers and
financial institutions as well as the central government and the Government of
Gujarat for their support and guidance.

Finally, I sincerely
acknowledge the support from you, our shareholders and my colleagues on the
Board for your support and continued faith in Essar Oil.

Thank you,

Chairman

Note: This does not purport to be the proceedings of the 16th Annual
General Meeting held on September 29, 2006